An appeal by Eamonn Holmes to overturn the 21 February 2020 decision of the First-tier tax tribunal regarding his IR35 case has been dismissed by the Upper-tier tax tribunal.
The case concerned engagements between his limited company, ‘Red, White and Green Limited’ (“RWG”), and ITV during the tax years between 2011/12 and 2014/15. The amount of tax owed is unknown.
After reading the decision, Dave Chaplin, CEO of tax compliance firm IR35 Shield, who observed the hearing, said: “I think the overall result for Holmes is wrong. The difficulty was that the Upper-tier tribunal’s rules did not allow new evidence to be introduced — only appeals on points of law could be heard. Seeking to appeal a decision from the First-tier tribunal requires an error of law to be identified, for which the bar is high. There is limited scope for the UT to interfere with the evaluative judgment of the FTT.”
The appeal challenges facing Red, White and Green
Appeals at the Upper-tier tax tribunal operate with a different set of tribunal rules. The appellant submits “grounds” for the appeal, which seek to demonstrate an error in law. The hearing is not a re-match, and no more evidence is heard nor allowed to be put forward, except in rare cases.
The tribunal referred to Mummery LJ in Brent LBC v Fuller [2011] EWCA Civ 267 and acknowledged that they “must not over-analyse the FTT’s reasoning process; be hypercritical of the way in which the Decision is written; or focus too much on particular passages or turns of phrase to the neglect of the Decision read in the round.”
The judges also took into account the directions from the Court of Appeal in Quashie v Stringfellow Restaurants Limited [2012] EWCA Civ 1735 at [9], which endorsed the following statement of principle:
“…The responsibility of determining and evaluating all the relevant admissible evidence (both documentary and otherwise) is that of the tribunal in the first instance; an appellate tribunal is entitled to interfere with the decision of that tribunal, that a contract of employment does or does not exist, only if it is satisfied that in its opinion no reasonable tribunal, properly directing itself on the relevant question of law, could have reached the conclusion under appeal, within the principles of Edwards v Bairstow [1956] AC 14.”
RWG was not going to dislodge the FTT Decision by disagreeing with the evaluative judgment based on the evidence submitted. RWG’s counsel was hamstrung by the FTT case, which took place almost five years ago in June 2018, and the emphasis on submissions & evidence back then was very different.
For example, on the arguments made on control, the judges could not interfere, stating: “We can only interfere with the FTT’s conclusion if we are satisfied that no reasonable tribunal, properly directing itself on the relevant question of law, could have reached that conclusion. We are satisfied that the FTT did properly direct itself as to the question of control. It reached a conclusion which was available to it on the evidence and there is no ground for us to interfere with that conclusion.”
Chaplin says: “The challenge for the appellant is that he would have needed a time machine to know what the Court of Appeal was going to say four years later in matters of law relating to being in business on own account - in the Atholl House case released on 26 April 2022. Had RWG’s advisors in June 2018 known what they know now, then perhaps more evidence would have been put before the tribunal, and the outcome would have been different.”
The RWG grounds of appeal
The grounds of appeal were summarised as follows:
Ground 1:
- The FTT erred in law in relation to control by failing to distinguish “editorial control”, which is “how” a worker does the work, from other more important forms of control, in particular “what” work should be done by the worker.
Ground 2: The FTT erred in law in its overall analysis because:
- It wrongly considered that its finding of sufficient mutuality of obligation and sufficient framework of control led to a presumption that there was a contract of employment.
- It wrongly disregarded certain factors in its overall consideration at this stage and failed to consider the whole picture.
On ground 1, Keith Gordon, barrister for RWG, submitted that ITV did not exercise sufficient control over Mr Holmes. He submitted that the FTT focused too much on editorial control and overlooked or gave little weight to factors where ITV did not and could not exercise control. He submitted that those other factors are key to determining the issue of control. However, the tribunal disagreed, stating: “Overall, we do not detect any error of law in the approach of the FTT to the question of control.”
On ground 2, Mr Gordon submitted that the FTT clearly misdirected itself as to the correct approach in the overall analysis and that it had made reference to the passages from the decision of Briggs J in Weightwatchers, which were expressly overruled by the Court of Appeal in Atholl House. The tribunal agreed, stating: “There is no suggestion that it omitted any relevant authorities or that its analysis indicates any other error of law, apart from its reference to Weightwatchers,” but then went on to state: “…we are satisfied that the FTT’s error in referring to the approach in Weightwatchers was not a material error. We reach that conclusion because on a fair analysis the FTT clearly weighed in the balance all the factors which it considered to be relevant, applying Hall v Lorimer.”
Described as the “second and most substantial criticism” was the submission that “…the FTT gave no weight to Mr Holmes’ other activities, in particular the fact that he was in business on his own account. Mr Gordon submitted that the FTT made plain that it gave no weight to Mr Holmes’ other activities and whether the assumed contracts were part of his carrying on a business on his own account. However, the tribunal concluded that “We do not accept that the FTT failed to consider whether the ITV contract was part of a wider business activity.”
With none of the grounds succeeding, the appeal was dismissed.
What is the impact of the RWG case on other cases
Should other broadcasters be concerned about the outcome of this case?
“No,” says Chaplin, “because there does not appear to be any new binding legal precedents made by the Upper-tier on this occasion. Each case turns on the merits of its own facts, or in this case, the lack of them.”
However, Chaplin points to paragraph 134 in the decision as a key pointer for firms seeking to make sure HMRC or tax tribunals do not inadvertently misconstrue the intentions of the parties: “…what happened in practice on a day to day basis may evidence the terms of the contracts, but not in a case where the hypothetical contract is based on the terms of detailed written contracts which define the rights and obligations of the parties.”
“The lesson,” says Chaplin, “is to make sure the contracts are a comprehensive reflection of the rights and obligations of the parties.”